Can A Demand Deadline Create Bad Faith Exposure

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Marcel asked me a very common question: “If I give them a specific deadline to respond to my settlement demand, will that somehow backfire and let them off the hook?” The short answer is, not necessarily, but it’s a nuanced issue. Setting a deadline doesn’t automatically create bad faith, but how you set it, and what happens when the insurance company ignores it, absolutely can.

California law places a duty of good faith and fair dealing on insurance companies throughout the claims process. This means they need to investigate reasonably, evaluate your claim honestly, and negotiate fairly. Setting a reasonable deadline for a response is a legitimate part of negotiation, forcing them to address your claim. However, you can’t issue an ultimatum that prevents them from properly investigating, or that traps them into a settlement they haven’t fully considered.

I’ve been practicing personal injury law in San Diego for over 13 years, and I’ve seen firsthand how adjusters strategically leverage deadlines – and how policyholders can inadvertently create problems for themselves. I was previously trained by a former insurance defense attorney, and this experience has given me intimate knowledge of how insurance companies evaluate, devalue, and deny claims. It’s crucial to understand their playbook to protect your rights.

What happens if an insurance company ignores my demand deadline?

Ignoring a reasonable demand deadline, in and of itself, doesn’t automatically constitute bad faith. However, it is a significant factor that a court will consider when evaluating a potential bad faith claim. If they simply ignore your deadline without explanation, and continue to stall without providing a legitimate reason, it starts to look like they’re not acting in good faith. More importantly, consistently delaying a response or providing inadequate justifications for the delay can create a pattern of unreasonable behavior.

The key is demonstrating that the insurance company’s conduct is not just slow, but unreasonable. For example, if you provide a 30-day deadline for a response, and they fail to respond at all, that’s more concerning than if they respond on day 31 with a legitimate counter-offer and a clear explanation for the delay. Documentation is critical – keep records of every communication, every phone call, and every attempt you make to resolve the claim.

We recently handled a case where an insurance company ignored a 21-day demand deadline, and then failed to provide a reasonable explanation for their delay for over 90 days. This, combined with other evidence of improper claim handling, ultimately allowed us to successfully pursue a bad faith claim against them, resulting in a settlement that significantly exceeded policy limits.

Can I sue for bad faith if they ignore my deadline and make a low offer?

Yes, potentially. Receiving a low offer after ignoring your deadline doesn’t necessarily resolve the bad faith issue, it can actually strengthen it. If the offer is so low that it’s clearly unreasonable given the facts of your case, and it’s made after they’ve ignored a reasonable deadline, it further suggests they haven’t properly evaluated your claim. Remember, insurance companies are required to conduct a reasonable investigation before making an offer.

However, a low offer alone isn’t enough to prove bad faith. You need to show that the adjuster didn’t adequately investigate the accident, failed to consider relevant evidence (like your medical records and witness statements), or employed tactics specifically designed to undervalue your claim. In San Diego, insurance adjusters are notorious for comparing claims to similar cases and selectively using evidence to justify their low-ball offers.

As detailed in CACI No. 2331, an insurance company must conduct a reasonable investigation. Ignoring a demand, coupled with a subsequent improper investigation, can easily establish a breach of that duty.

What constitutes a “reasonable” deadline for a response?

There’s no magic number, but generally, a 30-day deadline is considered reasonable. However, the specific circumstances of your case can influence this. If the claim is complex, requiring extensive investigation, a 60-day deadline might be more appropriate. Conversely, if the claim is straightforward and the insurance company already has all the necessary information, a 14-day deadline might be reasonable.

It’s also important to consider the insurance company’s internal protocols. Some companies have specific guidelines for responding to demands. Knowing these protocols, and referencing them in your demand letter, can further strengthen your position. Regardless, always put the deadline in writing and clearly state that you expect a response by that date.

Ultimately, the goal is to create a clear record of communication and demonstrate that you’ve acted reasonably throughout the claims process. Trying to rush them unfairly or making threats will likely backfire. A well-crafted demand letter, with a reasonable deadline, is a necessary step in protecting your rights and maximizing your recovery.

What if my demand included a specific “time is of the essence” clause?

A “time is of the essence” clause adds a layer of complexity. This clause essentially means that the deadline is strictly enforced, and any delay, even a minor one, could be considered a breach of contract. However, these clauses are often viewed skeptically by courts, particularly in insurance contexts.

Simply including the clause doesn’t automatically guarantee that you can sue for breach of contract if the deadline is missed. The court will still consider the overall reasonableness of the deadline, the insurance company’s conduct, and whether they had a legitimate reason for the delay. Furthermore, you must demonstrate that you suffered actual damages as a result of the delay. Often, these clauses are considered a factor among many rather than a definitive resolution.

It’s best to avoid overly aggressive language or unrealistic deadlines. Focus on creating a clear record of communication and demonstrating the insurance company’s unreasonable conduct, rather than relying on a “time is of the essence” clause to force their hand.

What should I do if the insurance company ignores my demand deadline?

First, document everything. Keep a record of the original demand letter, any follow-up communication, and any attempts to contact the adjuster. Next, consider sending a follow-up letter specifically referencing the missed deadline and requesting a response. If they continue to ignore you, it’s time to consult with an experienced personal injury attorney.

An attorney can help you evaluate your options, including filing a lawsuit for breach of contract and/or bad faith. They can also help you gather the evidence necessary to prove your claim and negotiate a fair settlement. Don’t wait to seek legal advice – the longer you wait, the harder it may be to recover the full value of your claim.